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October 20, 2017

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Chinese banks enjoy net US$300m in forex buying

CHINESE banks saw a net foreign exchange purchase of US$300 million in September, the first settlement surplus in more than two years as cross-border capital flows stabilized, official data showed yesterday.

Chinese lenders bought US$156 billion worth of foreign currency last month and sold US$155.7 billion, the State Administration of Foreign Exchange elaborated in a statement.

The data broke a deficit sequence that had been running for over two years.

In the first three quarters, Chinese banks bought US$1.2 trillion worth of foreign currency and sold US$1.31 trillion, resulting in a net sales of US$112.9 billion.

The amount marked a 54-percent drop from the deficit seen in the same period last year, and showed that supply and demand in the forex market was “basically” balanced, the SAFE said.

Businesses and individuals have become less willing to hold foreign currency, the regulator said.

Given China’s sound economic fundamentals, wider openness and more stable market expectations, cross-border capital flows will continue to be balanced and stable, the SAFE predicted.

Regarding the possible effect of US balance sheet reduction, the regulator said the move will not cause fundamental changes to cross-border capital flows.

There had been concerns over capital flowing out of the Chinese market in the second half of 2016, when the economy was facing downward pressure and the yuan was in the middle of a losing streak against the US dollar.

In January, China’s forex reserves had plunged below US$3 trillion, but as the economy stands on a firmer footing and the yuan continues to stabilize, the stockpile has increased steadily since February.

China’s forex reserves rose for the eighth month in a row in September to US3.1085 trillion, its highest level since October of 2016.

Official data yesterday showed China’s economy continued steady expansion in the first three quarters of this year, with growth at 6.9 percent year on year, well above the government’s annual target of 6.5 percent.


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